Avoiding Penalties When In Receipt of a Social Security Mismatch Letter
June 26, 2002
The Social Security Administration (SSA) has recently sent out an increasing number of “mismatch letters” to employers. Mismatch letters inform the employer that the Social Security number supplied by a particular employee is incorrect. Receipt of such a letter does not imply that the employee intentionally provided incorrect information and the letter is not a basis, by itself, for an employer to take any adverse action against the employee. Additionally, the letter makes no statement about an employee’s immigration status. Nonetheless, once an employer receives a mismatch letter, it should take steps to ensure compliance with the requirements of the Immigration Reform & Control Act of 1986 (IRCA), the Internal Revenue Service, and the SSA.
Compliance with the Immigration Reform & Control Act of 1986 (IRCA)
If an employer accepts a Social Security number for I-9 purposes and later receives a mismatch letter, IRCA requires the employer to investigate the employee’s work status before making any employment decisions.
IRCA forbids employers from hiring or continuing to employ aliens who are not authorized to work in the United States. IRCA establishes a verification system, which requires an employer to complete an I-9 Form, and examine either a document that establishes both employment authorization and identity, or examine one document that establishes employment authorization and one document that establishes identity. An employer satisfies the document examination requirement if the documents examined reasonably appear on their face to be genuine. It is a violation of IRCA to require applicants to produce more or different documents than are needed for compliance or to refuse to honor a document that reasonably appears on its face to be genuine.
Because employers have an affirmative duty to ensure that their employees are authorized to work in the United States, failure to investigate after learning that an employee has submitted false documents may result in a “knowing” violation of IRCA. An employer protects itself against liability under IRCA by performing a timely, good-faith investigation. The employer cannot rely on an employee’s self-serving corroboration of his or her employment eligibility. If an employer discovers that an employee has been working in the United States unlawfully, the employer may allow the employee another opportunity to present acceptable documentation and complete, amend or note the I-9 form accordingly. However, if the employee cannot present acceptable documentation, the employer must terminate the employee immediately or the employer will “knowingly” violate IRCA.
A knowing violation of IRCA can subject an employer to civil penalties. For a first-time violation of IRCA, an employer may be subject to fines from $250 to $2,000 for each alien. For a second-time violation the fines increase to $2,000 to $5,000 for each alien. After that, the employer is subject to a $3,000 to $10,000 fine for each alien. An employer also may be subject to fines for failing to fill out and maintain I-9s correctly, ranging from $100 to $1,000 for each I-9, and may be subject to criminal penalties if the employer has a “pattern or practice” of hiring unauthorized aliens.
If the employer wishes to report the suspected illegal alien to the INS after its investigation, it should contact its local INS field office. The INS will then determine whether the suspicions warrant further investigation. Employers reporting illegal activity should not expect to immediately see any action one way or the other. Normally the INS does not contact the person who provided information to the INS after the initial report is filed. The INS does not provide status reports on specific reports of illegal activity.
Compliance with the Internal Revenue Service (IRS)
The Internal Revenue Code requires an employer to report accurate information, and the IRS can penalize an employer when the name and Social Security number provided on the wage report do not match SSA’s records. SSA is required by law to provide the IRS with mismatch information so that the IRS can decide whether to assess penalties for erroneous filing.
Once an employer finds that an employee has provided an incorrect Social Security number, the employer should correct the incorrect W-2 by filling out a W-2C with the correct information for the years that the employer reported the wrong Social Security number. There will be no penalty to the employer for filing incorrect W-2s as long as the incorrect Social Security number was provided through no fault of the employer.
Compliance with the Social Security Administration (SSA)
The employer has no obligation under the Social Security Act to respond to the SSA or to take any action when it receives a mismatch letter. SSA has no enforcement authority against an employer who fails to act or respond to a mismatch letter. However, to comply with the Internal Revenue Code an employer may wish to correct the information with the SSA. Additionally, an employee may wish to correct the information with the SSA to ensure that his or her earnings are properly credited for Social Security benefit payments. When SSA sends a mismatch letter to the employer, SSA suggests the employer should notify the employee of the mismatch and advise the employee to visit an SSA office to correct the information.
Conclusion
If an employer receives a mismatch letter from the SSA, the employer should not make any immediate employment decision before doing a good-faith investigation. If at the conclusion of the investigation, the employer determines that the employee was unlawfully working in the United States, and the employee has not come forward with other acceptable documentation, the employer must terminate the employee immediately. If the employee is here legally and merely reported the incorrect Social Security number, the employer should file a separate W-2C with the IRS for each year the employer reported the incorrect information. The employer also may wish to correct the mismatch with the SSA and advise the employee of the situation for benefit purposes.
For more information, contact Darby L. Duncan and F. Denise Rios at 888-688-8500 or via e-mail by clicking on their respective names.
Related Practices